NOW Inc. Reports Fourth Quarter and Full-Year 2017 Results

February 14, 2018

HOUSTON–(BUSINESS WIRE)–#DNOW–NOW Inc. (NYSE: DNOW) announced results for the fourth quarter and
full-year ended December 31, 2017.

Earnings Conference Call

February 14, 2018

8:00 a.m. CST

1 (800) 446-1671 (North America)

1 (847) 413-3362 (Outside North America)

Webcast: ir.distributionnow.com

Fourth Quarter 2017 Financial Highlights

Revenue was $669 million for the fourth quarter of 2017, up 24 percent
year over year, and down 4 percent sequentially versus a reduction in
billing days of 5 percent.
Net loss was $3 million for the fourth quarter of 2017, versus $71
million a year ago. Non-GAAP net income excluding other costs was $1
million compared to a loss of $31 million in the fourth quarter of
2016.
Diluted loss per share was $0.03 for the fourth quarter of 2017
compared to $0.66 a year ago. Non-GAAP diluted earnings per share
excluding other costs was $0.01 for the fourth quarter of 2017
compared to a loss per share of $0.29 in the fourth quarter of 2016.
Non-GAAP EBITDA excluding other costs for the fourth quarter of 2017
was $13 million compared to a loss of $31 million in the fourth
quarter of 2016.
Included in the fourth quarter of 2017 results, but not characterized
as other costs, was a pre-tax gain of $10 million from the sale of a
property previously held for sale, consistent with our treatment of
similar gains and losses in prior periods.

Refer to Supplemental Information in this release for GAAP to non-GAAP
reconciliations.

Robert Workman, President and CEO of NOW Inc., added, “Through the
downturn, we emerged a stronger, leaner and more agile organization. The
year 2017 was transformative for DNOW in that we added $541 million in
revenues, while continuing to lower costs, becoming a business more than
25% larger than it was in 2016. Incrementals were greater than 30%,
signifying a solid financial recovery for DNOW and positioning us to
capitalize on a growing market in 2018.”

Prior to the earnings conference call a presentation titled “NOW Inc.,
Fourth Quarter and Full-Year 2017 Review & Key Takeaways” will be
available on the Company’s Investor Relations website.

About NOW Inc.

NOW Inc. is one of the largest distributors to energy and industrial
markets on a worldwide basis, with a legacy of over 150 years. NOW Inc.
operates primarily under the DistributionNOW and Wilson Export brands.
Through its network of approximately 285 locations and 4,600 employees
worldwide, NOW Inc. offers a comprehensive line of products and
solutions for the upstream, midstream and downstream energy and
industrial sectors. Our locations provide products and solutions to
exploration and production companies, energy transportation companies,
refineries, chemical companies, utilities, manufacturers and engineering
and construction companies.

Statements made in this press release that are forward-looking in
nature are intended to be "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934 and may
involve risks and uncertainties. These statements may differ
materially from actual future events or results. Readers are
referred to documents filed by NOW Inc. with the U.S. Securities and
Exchange Commission, which identify significant risk factors which could
cause actual results to differ from those contained in the
forward-looking statements.

NOW INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
December 31,	December 31,
2017	2016
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	98	$	106
Receivables, net	423	354
Inventories, net	590	483
Prepaid and other current assets	18	16
Total current assets	1,129	959
Property, plant and equipment, net	119	143
Deferred income taxes	2	1
Goodwill	328	311
Intangibles, net	166	184
Other assets	5	5
Total assets	1,749	1,603
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	290	$	246
Accrued liabilities	103	100
Other current liabilities	1	1
Total current liabilities	394	347
Long-term debt	162	65
Deferred income taxes	7	7
Other long-term liabilities	1	1
Total liabilities	564	420
Commitments and contingencies
Stockholders' equity:
Preferred stock – par value $0.01; 20 million shares authorized;
no shares issued and outstanding	−	−
Common stock – par value $0.01; 330 million shares authorized; 108,030,438 and
107,474,904 shares issued and outstanding at December 31, 2017 and 2016, respectively	1	1
Additional paid-in capital	2,019	2,002
Accumulated deficit	(730	)	(678	)
Accumulated other comprehensive loss	(105	)	(142	)
Total stockholders' equity	1,185	1,183
Total liabilities and stockholders' equity	$	1,749	$	1,603

NOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Three Months Ended (Unaudited)	Year Ended
December 31,	September 30,	December 31,
2017	2016	2017	2017	2016
(Unaudited)
Revenue	$	669	$	538	$	697	$	2,648	$	2,107
Operating expenses:
Cost of products	541	450	562	2,147	1,762
Warehousing, selling and administrative	128	135	141	542	567
Operating profit (loss)	−	(47	)	(6	)	(41	)	(222	)
Other expense	(3	)	(1	)	(3	)	(11	)	(8	)
Loss before income taxes	(3	)	(48	)	(9	)	(52	)	(230	)
Income tax provision (benefit)	−	23	−	−	4
Net loss	$	(3	)	$	(71	)	$	(9	)	$	(52	)	$	(234	)
Loss per share:
Basic loss per common share	$	(0.03	)	$	(0.66	)	$	(0.08	)	$	(0.48	)	$	(2.18	)
Diluted loss per common share	$	(0.03	)	$	(0.66	)	$	(0.08	)	$	(0.48	)	$	(2.18	)
Weighted-average common shares outstanding, basic	108	107	108	108	107
Weighted-average common shares outstanding, diluted	108	107	108	108	107

NOW INC.
SUPPLEMENTAL INFORMATION
BUSINESS SEGMENTS
(In millions)
Three Months Ended (Unaudited)	Year Ended
December 31,	September 30,	December 31,
2017	2016	2017	2017	2016
(Unaudited)
Revenue:
United States	$	488	$	379	$	506	$	1,914	$	1,445
Canada	85	73	96	356	258
International	96	86	95	378	404
Total revenue	$	669	$	538	$	697	$	2,648	$	2,107

NOW INC. SUPPLEMENTAL INFORMATION (CONTINUED)
U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS
NET LOSS TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED) (In millions)
Three Months Ended	Year Ended
December 31,	September 30,	December 31,
2017	2016	2017	2017	2016
GAAP net loss (1)	$	(3	)	$	(71	)	$	(9	)	$	(52	)	$	(234	)
Interest, net	2	1	2	6	3
Income tax provision (benefit)	−	23	−	−	4
Depreciation and amortization	12	14	12	50	53
Other costs (2)	2	2	−	3	10
EBITDA excluding other costs	$	13	$	(31	)	$	5	$	7	$	(164	)
EBITDA % excluding other costs (3)	1.9	%	(5.8	%)	0.7	%	0.3	%	(7.8	%)
NET LOSS TO NON-GAAP NET INCOME (LOSS) EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED) (In millions)
Three Months Ended	Year Ended
December 31,	September 30,	December 31,
2017	2016	2017	2017	2016
GAAP net loss (1)	$	(3	)	$	(71	)	$	(9	)	$	(52	)	$	(234	)
Other costs, net of tax (4) (5)	4	40	6	23	85
Net income (loss) excluding other costs (5)	1	(31	)	(3	)	(29	)	(149	)
DILUTED LOSS PER SHARE TO NON-GAAP DILUTED EARNINGS (LOSS) PER SHARE EXCLUDING OTHER
COSTS RECONCILIATION (UNAUDITED)
Three Months Ended	Year Ended
December 31,	September 30,	December 31,
2017	2016	2017	2017	2016
GAAP diluted loss per share (1)	$	(0.03	)	$	(0.66	)	$	(0.08	)	$	(0.48	)	$	(2.18	)
Other costs, net of tax (4)	0.04	0.37	0.05	0.21	0.79
Diluted earnings (loss) per share excluding other costs (5)	$	0.01	$	(0.29	)	$	(0.03	)	$	(0.27	)	$	(1.39	)

(1) In an effort to provide investors with additional information
regarding our results as determined by GAAP, we disclose various
non-GAAP financial measures in our quarterly earnings press releases and
other public disclosures. The non-GAAP financial measures include: (i)
earnings before interest, taxes, depreciation and amortization (EBITDA)
excluding other costs, (ii) net loss excluding other costs and (iii)
diluted loss per share excluding other costs. Each of these financial
measures excludes the impact of certain other costs and therefore has
not been calculated in accordance with GAAP. A reconciliation of each of
these non-GAAP financial measures to its most comparable GAAP financial
measure is included in the schedules herein.

(2) Other costs primarily includes the transaction costs associated with
acquisition activity, including the cost of inventory that was stepped
up to fair value during purchase accounting and severance expenses which
are included in operating loss.

(3) EBITDA % excluding other costs is defined as EBITDA excluding other
costs divided by Revenue.

(4) Other costs, net of tax, for the three and twelve months ended
December 31, 2017 and 2016, respectively, included expenses of $3
million, $21 million, $39 million and $78 million, after tax,
respectively, for a valuation allowance recorded against the Company’s
deferred tax assets; as well as, $1 million, $2 million, $1 million and
$7 million, respectively, after tax, in transaction costs associated
with acquisitions, including the cost of inventory that was stepped up
to fair value during purchase accounting related to acquisitions, and
severance expenses, which are included in operating loss. The Company
has excluded the impact of a $69 million tax charge related to the Tax
Cuts and Jobs Act and a $3 million tax benefit related to previously
disallowed deductions on its valuation allowance in computing net income
(loss) excluding other costs for the three and twelve months ended
December 31, 2017.

(5) Totals may not foot due to rounding.

Contacts

NOW Inc.
Daniel Molinaro, 281-823-4941
Senior Vice President
and Chief Financial Officer